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Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

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Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#41

Post by kristopolous »

lmkg wrote: post #23
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

It's somewhat surprising because the recognition of "risk" as a concept is much more recent, and its relation to finance and rates much more recent than that. If the relation between risk and rates of return has held for longer than that, then it means that it's an emergent phenomenon of markets without anyone actually using it as an intentional strategy.

As a formalized quantifiable theory, sure. But it's intuitive. If you think someone has less of a chance of making good on their promises whether because of their actions or some external calamity you will ask for more from them.

I wouldn't be surprised to find such relationships chiseled in ancient tablets. Trust, risk and reward among groups is a topic that animal behaviorists study. I'm certainly not in that field but I believe they claim it's a common evolutionary trait and have done experiments with children and primates to show primates lacking this intuition wherein 2-year old humans don't.

There was a lecture about this I saw recently. I'll have to dig it up

edit: here: https://www.lse.ac.uk/Events/2020/11/202011191630/cooperatio... links at the bottom

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#42

Post by joegibbs »

pochamago wrote: post #16
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

Ethiopia effectively started a civil war, but I don't think it's source is the pandemic.

There was a war between Armenia and Azerbaijan as well, it’s also a bit of a reach to tie it to COVID too.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#43

Post by karpierz »

anewaccount2021 wrote: post #35
ahepp wrote: post #21

Earlier quoted context omitted.

Yet interest rates have yet to respond (unless I have missed some major news). You are correct to point out the risk, but I don't think we can call it currency debasement yet.

We printed more money last year than we printed from 1776-2000. The dollar has already lost 99% of its purchasing power from its inception (that isn't agitprop, its a verifiable fact when measured against fixed commodities over time). How much house can a dollar buy versus twenty years ago? If the dollar was indeed rising in value over time, a dollar would buy more house today than in 2000. Before we left the gold st…

How many iPhones can a dollar buy 20 years ago?

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#44

Post by jbay808 »

ahepp wrote: post #27
kangaroozach wrote: post #24

Earlier quoted context omitted.

Printing money is debasing currency, no? We are stealing purchasing power from every holder of dollars.

Only if the purchasing power of a dollar goes down. I know MMT is controversial, but I think of it more as a focus on empiricism. Sure, rationality suggests that printing dollars will reduce the value of dollars. But kickstarting inflation is in some ways the entire point, no? And it has remained consistently below FR targets for the past decade (I believe, I'm not an economist and I'm not looking at any charts)

If I run a bakery and you run, say, the Mint...

Ten years ago, I bake a loaf of bread, and sell it for a dollar. Then I invent an amazing machine that can produce the same bread more cheaply. I'm about to drop my bread prices, but you mint some new coins and add them into circulation. So I keep the price at a dollar per loaf.

I scrutinize my bread supply chain to the last detail. I optimize the flour, I optimize the temperature. I fire all the workers and replace them with machines. I'm saving every penny I can. Loaves get made faster! Loaves get made cheaper! Bread is flying off the conveyor belt!

You pull a lever and crank up the printing press. Dollars are being added in the millions, in the billions!

The price of bread stays at a dollar; has the currency been debased? I honestly don't know.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#45

Post by pishpash »

kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

It's probably more that capital has become more and more abundant relative to need for capital (whether through wealth accumulation or more advanced financial infrastructure), so of course it has become cheaper and cheaper.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#46

Post by jbay808 »

karpierz wrote: post #43
anewaccount2021 wrote: post #35

Earlier quoted context omitted.

We printed more money last year than we printed from 1776-2000. The dollar has already lost 99% of its purchasing power from its inception (that isn't agitprop, its a verifiable fact when measured against fixed commodities over time). How much house can a dollar buy versus twenty years ago? If the dollar was indeed rising in value over time, a dollar would buy more house today than in 2000. Before we left the gold st…

How many iPhones can a dollar buy 20 years ago?

How many Dodo birds can a dollar buy today?

A better question might be, how much would you have volunteered to pay twenty years ago for the functionality an iPhone gets you today? In 2001, if today's iPhone were being sold, what price would have made it a successful product among average consumers? (Not, say, the military or super-wealthy).

I think... Less than $10,000 for certain, less than $5,000 most likely. In that sense the price has certainly come down, but semiconductors and electronics has obviously gone through rapid technological scaling and deflation is expected in that sector.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#47

Post by peteretep »

kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> Mass death

Covid has killed a lot of people and created a lot of heart-break, and it would be heartless to try and minimise that or to view it in purely economic times in this moment.

However, I think that in 100 years, future historians will describe the effect of the deaths itself as being pretty negligable: maybe 10% over the expected rate without Covid in 2020 and 2021, maybe 5m people in each year total, against an expected death rate of 50-60m. Many of these deaths were people outside of the primary workforce, unlike say WW2 which killed off many of the young able-bodied men the mid 1900s economies primarily relied on.

I guess all I'm really trying to say is that when the story of Covid is written in 100 years time, "mass death" probably won't get much of a look-in vs economical and mental-health costs of lockdown, disruption to business, and so on.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#49

Post by throw0101a »

koolba wrote: post #18
kristopolous wrote: post #13

This isn't surprising. Risk and rates are related and there's been an increase in stability and decrease in risk throughout the centuries. As far as a stable society goes, low interest rates are a good sign Even amidst this terrible pandemic, no country has collapsed, nobody has gone to war, currencies haven't been debased, all protests have more or less been handled, nothing is truly out of control. Mass death and f…

> ... currencies haven't been debased ... We’ve printed trillions of dollars and Congress is en route to print trillions more. The price for that has yet to be paid.

> We’ve printed trillions of dollars and Congress is en route to print trillions more.

First off: it's not Congress that controls the money supply, it's the Fed. They're independent.

> The price for that has yet to be paid.

What price is that? Inflation? Japan's M2 has risen a lot, and it hasn't seen any for decades:

* https://fred.stlouisfed.org/series/MYAGM2JPM189S

* https://fred.stlouisfed.org/series/FPCPITOTLZGJPN

Japan's interest rate has been below 1% since April 1995:

* https://fred.stlouisfed.org/series/INTDSRJPM193N

From 2002 to 2006 it was 0.1%.

The equation for inflation is: M x V = P x Q

Everyone talks about "printing money" (money supply: M) with the Fed, but no one seems to pay attention to velocity (V). Which has dropped off a cliff:

* https://fred.stlouisfed.org/series/M2V

The Austrian, Milton Friedman Monetarists have been squawking about inflation for ten years:

> We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.

* https://economics21.org/html/open-letter-ben-bernanke-287.ht...

Meanwhile the Keynesians have been saying it wouldn't be a problem. Both sides made predictions, results are in, the experiment is over:

Start listening to Keynesians.

Re: Global real interest rates and the ‘suprasecular’ decline, 1311–2018 (2020)

#50

Post by vbtemp »

ahepp wrote: post #27
kangaroozach wrote: post #24

Earlier quoted context omitted.

Printing money is debasing currency, no? We are stealing purchasing power from every holder of dollars.

Only if the purchasing power of a dollar goes down. I know MMT is controversial, but I think of it more as a focus on empiricism. Sure, rationality suggests that printing dollars will reduce the value of dollars. But kickstarting inflation is in some ways the entire point, no? And it has remained consistently below FR targets for the past decade (I believe, I'm not an economist and I'm not looking at any charts)

Have you had to pay for medical care, child care, housing, care for elderly or disabled loved ones and/or education?? How on earth can you say that inflation has remained low??? All of those have become insanely expensive and people die all the time because they can't afford them!

Just because cheap, crappy electronics and egg McMuffins don't appreciate in cost and stay crappy and cheap does NOT mean inflation is low. Anyone can play stupid games where you say inflation is low if you only pick certain goods made by robots or poor people overseas.

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